The Impact of International Public Sector Accounting Standard (IPSAS) in Nigeria Public Service (A Case Study of Lagos State Civil Service)
Purpose of the study
The main objective of the study is to determine the impact of IPSAS adoption on the value relevance of accounting information of public service in Nigeria. Specifically, the study aimed to:
- Determine the impact of IPSAS adoption on value relevance of Book value per share of public service in Nigeria
- Determine the impact of IPSAS adoption on value relevance of earnings per share of public service in Nigeria.
- Investigate the impact of IPSAS adoption on value relevance of capitalized intangible assets of public service in Nigeria
- Determine the incremental impact of IPSAS adoption on relevance of accounting information of listed financial firms in Nigeria
Conceptual framework of IPSAS
The development of the IPSAS has its origin in the accounting progression as a way to improve the transparency and accountability of governments and their agencies by improving and standardizing financial reporting. The IPSAS Board (IPSASB) is an independent standard setting board supported by the International Federation of Accountants (IFAC). The IPSASB issues IPSAS, guidance and other resources for use by the public sector around the world.
The IPSASB (and its predecessor, the IFAC public sector committee) has been developing and issuing accounting standards for the public sector since 1997. As transactions are generally common across both the private and public sector, there has been an attempt to have IPSAS converged with the equivalent International Financial Reporting Standards (IFRS).
The IPSAS are also developed for financial reporting issues that are either not addressed by adopting an IFRS or for which no IFRS has been developed. The IPSASB started out with the conceptual framework of the International Accounting Standards Boards (IASB) and is in the process of developing its own conceptual framework to meet the financial reporting needs of entities in the public sector.
The public sector, for the purpose of IPSAS, refers to national government, regional governments (e.g state, provincial and territorial), local government (e.g town and city), and related government entities (e.g agencies, boards, commissions and enterprises). The IPSAS applied in the preparation of general purpose financial reports that are intended to meet the needs of users who cannot otherwise command reports to meet their specific information needs. IPSAS are aimed for application to the general purpose financial reporting of all public sector entities other than Government Business Enterprises (GBEs). GBEs are expected to apply IFRS.
Countries that have adopted IPSAS
The increasing demand of high quality global financial reporting standards of public entities brought to the fore the craze for adoption of IPSAS by both the developing and developed countries. According to , the countries that have adopted IPSAS are grouped as follows:
Countries that have fully adopted and implemented IPSAS
Abu Dhabi, Albania, Australia, Azerbaijan, Bangladesh, Brazil, Canada, Cayman Islands, Cyprus, Costa Rica, East Timor, Fiji, France, Georgia, Japan, Kazakhstan, Kyrgyzstan, Latvia, Liberia, Lithuania, Malaysia, New Zealand, Nicaragua, Pakistan, Palestine, Philippines, Romania, Russia, Singapore, Slovak Republic,
For the purpose of this study, correlation, pre and post research designs are used. The reason for the selection of these designs is; first, correlation, pre and post research designs are sibling of quasi-experimental research design which relate to social science research. And the second, correlation, pre and post research design has the ability of describing the statistical association between the two or more variables and allows for making predictions by testing the expected relationship between variables.For the pre-post design, the period of the study is split in to 4 years each, 2008-2011 and 2012-2015. Therefore, the two research designs are suitable and appropriate for this study.
Population and Sampling Design.
The population of the study comprises all the ministries in the Lagos civil service.
DATA PRESENTATION, ANALYSIS AND DISCUSSION
Table 4.1 presents the descriptive statistics for both pre and post IPSAS compliance, where minimum, maximum, mean and standard deviations of the data for the variables used in the study are presented and discussed.
CONCLUSION AND RECOMMENDATIONS
Based on the discussion and analysis in the preceding chapter, the study concluded that both empirical and statistical evidence on the utility of three explanatory variables of book value, earnings per share and capitalizes intangible in predicting the explained variable (share prices of the sample firm) was provided. Also, it is concluded that even though the adoption of IPSAS was mandated in order to increase the value relevance of accounting information, that mandatory adoption has been proven to enhance the relevance of book value of equity to the users of accounting information of financial service firms in Nigeria through share prices.
Secondly, this study concludes that relevance of IPSASs regarding to earnings per share has been improved after the adoption of IPSAS. This can be further explained by the fact that adoption of IPSAS has not restored the confidence of investors by influencing the share price of financial service firms in Nigeria.
Thirdly, the study provides evidence that value relevance of capitalised intangible assets has been improved after the adoption of IPSAS. This can be explained by the fact that the mandatory adoption has enhanced the investors need by influencing the share price of financial service firm in Nigeria.
Lastly, IPSAS adoption reflect more value relevant information on accounting information which is beyond that of pre IPSAS adoption period through the share prices of public service in Nigeria.
In line with the findings and conclusions of the study the following recommendations are proffered:
- Statistical evidence revealed that book value per share has conveyed useful information to the market share price of the public service after the adoption of IPSAS. Therefore, management should pay more attention to IPSAS by ensure adequate compliance. This can be achieved by strengthening internal control unit in the organization to ensure that every aspect of accounting processes undergone a holistic check of IPSAS compliance checklists. Similarly, potential and existence investors should give priority investment wise, to the company that adopts IPSAS fully as shown statistically that the said standards influence the share prices through book values of equity.
- Statistical evidence proved that capitalized intangible asset has impact on share price of Nigeria public service after IPSAS adoption period. Therefore, management should capitalize their intangible assets because they have significant impact on market share price. Also the Standard setters should therefore ensure adequate adherence to the IAS 38 which prescribe how intangible assets should be capitalized, expensed, amortized or impaired. Managers should ensure that more intangible capital should be present in their financial
- Financial reporting council and other regulatory agency should ensure the strict adherence of IPSAS. Because the adoption of the standard is proved to have an incremental value relevance on accounting information of public service in Nigeria.
- Abayadeera, N. (2010). Value relevance of information in high-tech industries in Australia: financial and non-financial (Doctoral dissertation, Victoria University).
- Abiodun, B. Y. (2012).Significant of accounting information on corporate values of firms in Nigeria.Research Journal in Organizational Psychology & Educational Studies, 1(2), 105–113.
- Aboody, D., & Lev, B. (1998). The value relevance of intangibles: The case of software capitalization. Journal of Accounting research, 36, 161-191.
- Abubakar, S. &Abubakar, M. (2015). Intangible assets and value relevance of accounting information of listed High-Tech firms in Nigeria. Research Journal of Finance and Accounting, (6)11, 60-78
- Akpan-Essien, I. (2011). The international public sector accounting standards (IPSAS).The Role of the Chartered Secretary and Administrator. A paper presented at the 35th Conference of ICSAN. Lagos Sheraton Hotels and Towers.October 26th and 27th.
- Akpefan, O. A &Akande A.O. (2012). International Financial Accounting Standard (IPSAS):Benefits, obstacle and intrigues for implementation in Nigeria. Research Journal of Finance and Accounting,3(10),
- Alfonso, L., Van Hulzen, P., Sotiropoulos, I., &Georgakopoulos, G. (2011).Amortization versus impairment of goodwill and accounting quality.International Journal of Economic Sciences and Applied Research, (3), 93-118.